LPG price hike: Unfair, unexplained

The increase in the price of LPG cylinders last week came as a surprise and has drawn criticism and protests. The price was increased by Rs 50 for domestic cylinders and Rs 350 for commercial cylinders. A domestic cylinder costs about Rs 1,105 now and the price of a commercial cylinder has gone up to Rs 2,190. The latest price hike is the first in eight months and comes immediately after a round of Assembly elections in the North-Eastern states.

When the prices of petroleum products were deregulated in the country, the rationale was that they should be linked to the international crude prices so that oil marketing companies would not have to suffer losses because of price fluctuations. But, in effect, the prices have become political and have become linked to electoral cycles. There were Assembly elections in five states in March-April 2021. The prices which were held stable till then were raised many times that year after the election results were declared in May. The latest hike has been timed between the North-East elections and a series of other elections culminating in the 2024 Lok Sabha elections.

The increases were effected when, and despite the fact that, the international crude prices have been declining. The price of the Russian crude that India has been importing after the start of the Ukraine war is much lower than the international prices. The need for increasing fuel prices has therefore come under question. Even the Ukraine war has been cited as a reason for the price hike. No-one would believe the argument that it is the marketing companies that take the decisions on gas prices based on international prices. The linkage to elections proves that that claim is false.

The government withdrew the subsidy on cooking gas in 2020 when a domestic cylinder cost about Rs 600. As the prices have since risen, the government did not reinstate the subsidy. Only those who received LPG cylinders under the Ujwala scheme receive a subsidy of about Rs 200 per cylinder now. When there is no subsidy on the gas, there should be convincing reasons for increasing the price.

The increase in price has come at a time when inflation is elevated. When the prices of all other essential commodities have increased, the LPG price hike will add to the burden and it will have an impact on the consumer price index. Many eateries have already increased the prices of food articles as they find it difficult to absorb the hefty increase in the price of commercial cylinders. Many families that had started using LPG gas stopped using it when the subsidy was stopped. More people may be forced to surrender their connections now.